Clearly no reasonable person would accept a performance video from Russian pop stars "T.A.T.U." as proof positive that Capitalism leads to degeneracy. After all, what they have in Russia isn't actually capitalism, it just looks like capitalism. Don't believe me? See the Mercedes? It looks like capitalism until you get close enough to see that the car is very well armored. For a while there, it was a kleptocracy, from what we are told here in the West, then once everything had been stolen and the thefts had been consolidated, it became an oligarchy with wealth defended with private armies and with the State withering away even as had been predicted by Karl Marx. Yet, of course, in any anarchic conditions, new centers of power emerge and it has been interesting indeed to watch a very strange set of contrasts playing against each other. To fight against the consolidation of power around the oligarchs and their private armies, Mr Putin declared that Russian Federation would be a country founded on Rule of Law rather than on the power of the strong-man. Yet of course, it is necessary for him to become strong-man to do this...
In the end, forces originating far from Moscow reached out across the globe and in places have forced entire nations into economic collapse. In Iceland, the national debt is 850 percent of Gross Domestic Product. Comparable ratios of debt to GDP exist in various Balkan nations outside of the European Union, though Iceland is widely believed to have been the worst victim.
Capitalism in the US isn't doing very well, either.
Can you call it capitalism when it isn't exactly a free-market economy?
Can socialism save us?
It may not work very well when there are mixtures of economic models, each without a clear demarkation of domain. When a flooding river crosses lava from a volcanic eruption, can we say that it has changed its course when it flashes into live steam?
We have no certainty... only data, slices out of time and with limited field of vision.
As much as I dislike what has proceded from the writings of Karl Marx, still, many of his observations are close to truth.
Failures of Capitalism are generally in two classes. First, there is the failure of the individual as economic pressures invite the capitalist to maximize profits, ideally with a view to expanding the capital investment in infrastructure or production, but done in such as way as to drive payments to the workers to the lowest level where the worker can survive and reproduce his kind.
The second failure of Capitalism is a failure of the system. Pure capitalism is effectively anarchy which inevitably comes to be dominated by wealth, with little or no restraint on that wealth. Monopoly becomes entrenched and eventually various monopolies will battle, and will consolidate their holdings, eventually becoming not much different from political sovereigns of the hereditary aristocracy.
Both of these classes of failure have long been known in the US, and various regulations have been placed to guard against excessive power of Monopoly, and to protect and defend the rights of the worker for collective bargaining and on-the-job safey and retirement benefits.
Yet we have seen a third type of failure. As this is the second time within a century, we may assume that regulatory evasion -- or exploitation of regulatory blind-spots -- will be another of the failure modes of capitalism against which we must always guard.
For now, though, we are watching a destitution of the workers, and a harvesting of the wealth of the middle-class, who were encouraged to gamble in a rigged game that favors management.
The Washington Post notes a curious gap in home-ownership stastistical surveillance. It seems that a million or more homeowners are seriously delinquent but not in foreclosure.
The article offers a bit of insight:
[ ... ]
The backlog of seriously delinquent mortgages, which so far affects about 1 million borrowers, is a shadow over hopes for a rebound in the nation's housing markets. It masks the full extent of the foreclosure crisis and threatens to depress prices even further just as some parts of the country are hinting at recovery. For lenders, it could portend even more financial losses tied to the mortgage meltdown.
"It just means foreclosure rates are going to keep rising," said Patrick Newport, an economist for IHS Global Insight.
Rising mortgage delinquencies were at the root of the recession, and many economists say an economic recovery will be difficult until the housing market recovers and home prices stabilize.
And even though a delayed foreclosure can be a blessing for some troubled homeowners, for others, it simply prolongs the financial distress, leaving them on the hook for the condition of the property. Even if they move out, they cannot move on.
"I have even begged them for a foreclosure," delinquent mortgage-holder Charlotte Jensen said. When she realized she couldn't save her Glen Allen home last year, she filed for bankruptcy, packed up her family and moved out. Nearly a year later, Bank of America has yet to take back the home.
[ ... ] ("Not Paying the Mortgage, Yet Stuck With the Keys", Merle, Renae, Washington Post, June 24, 2009)
This reminds me of how, in October 2007, it was observed that home sales were starting to slow and that there was a vast overhang of unsold new homes were being helf off the market by the builders, but that it was expected that the builders would have to start putting them into the market no later than mid-2008 at the far outside.
The Astute Reader will recall that this combined with the massive rise in fuel prices to slow the economy to the point where home prices started to decline, and highly leveraged "commoditized debt obligations" stopped increasing in value and that put a stop to the function of the even more highly leveraged "credit default swaps" and that crippled the financial market to the point where nobody could borrow anything or lend anything and we saw the creation of "toxic debt", as utter uncertainty of valuation -- or even potential valuation or even sanity of attempting to assing value -- came to resemble a classic thought-experiment in physics, and Schrödinger's Cat Clawed Wall Street A New One.
The problem we may have, as noted above in the Post, could be that the banks and other lenders are in no hurry to assume full ownership of these properties, preferring them to "languish off of the books" as it were. Why rush to take on more assets to sell at a loss?
It's also quite possible that the lenders don't want to put these onto the market -- which they would have to do, as soon as they reclaim title -- as that would drive the market even lower. And what happens to the value of their toxic assets, then? They still don't really know the value of the toxic assets, and they're not even sure whether or not reclaiming ultimate title to these million-or-so properties adds those properties to the toxic-assets column, or to the real (non-variable and accurately accountable) assets column.
All they do know for sure is that the more homes they bring to market, the less the value of any of them. And they also know that they cannot long remain in the business of being real-estate owners in the home market... lest they be forced into commoditizing it, and selling it as tranches. And we all know where that led.
Further, the Post notes that new home sales are stagnant and that there is an estimated backlog of new homes that would take 10.2 months to sell at the present rate ("New-Home Sales Stagnant Despite Hopeful Predictions", Merle, Renae, Washington Post, June 24, 2009).
So, with an increasing need for certainty as to the valuation of the "toxic assets", the lenders are going to have to start being more aggressive in foreclosing properties that are "seriously delinquent" in mortgage payments. That will add to the downward pressure on new-home prices and remove almost all incentive in the industry to build new homes. The new-home construction industry is effectively dead at this point in time.
Such home sales as are occurring tend to be in "distressed properties" yet even with these bargain-basement prices, sales are far lower than expected.
In part, this may be due to a gut feeling on the part of consumers that a vicious cycle is poised at clifftop, ready to fall over the edge at any time.
As the new homes construction industry is in fact just about out of business for now, the majority of the workers are laid off, and are not making enough money to avoid becoming "seriously delinquent" on their own mortages.
Here in Montgomery, we have seen a significant increase in home overcrowding, especially as "immigrant workers" (legal, or otherwise) increase their living density as some become unable to pay their own mortgages and move in with other groups in the hope that with enough people, at least that one mortgage can be paid.
Yet with those new residents at the overcrowded homes, there is also an overcrowding of possessions... and starting July 1, commercial vehicles can't be parked on the streets where this home overcrowding is prevalent, and commercial vehicles suddenly also cannot be parked on the properties. New and rather more aggressive measures against home-overcrowding and storage of the tools of business will also come into effect on July 1.
With no work now, nor for the forseeable future, with not much credit available and with no declarable income, falling irremediably far behind on the mortgages yet unable to divest via foreclosure final actions, what happens to these properties?
Perhaps we'll all wind up skinny and decadent:
But somehow I doubt that in the US, obesity will stop being a problem, although as in the video above, inevitable comparisons with the migration of lemmings will occur.
More to come? If so, I'll try to drag out some more fun europop video.
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